Public Bill Committee

[Mr David Amess in the Chair]

Clause 24  - Right to price reduction or final right to reject

Stella Creasy: I beg to move amendment 25, in clause 24, page 15, line 34, leave out from ‘(12)’ to end of line 39.

David Amess: With this it will be convenient to discuss amendment 26, in clause 24, page 15, line 40, leave out subsection (11).

Stella Creasy: Good morning to you, Mr Amess, and to all members of the Committee. We had a wonderful time on Tuesday. Explaining some of the consumer problems we have had in our lives and how that has influenced our thinking was therapeutic for many of us; I am sure today will be no different. We start with a continuation of our debate about people getting their money back in particular circumstances. In particular, we are discussing the right to a price reduction and the final right to reject goods, which is dealt with in clause 24, and what people should get back when goods have gone wrong.
Amendments 25 and 26 reflect our concerns, and I hope we can have a good debate about the provisions dealing with price reductions, in particular the application of such price reductions to cars. Cars are probably the most obvious example of goods that, once bought, depreciate substantially. The question for us is whether the Government have taken the right approach in the Bill to dealing with depreciation, the right to reject and the right to a refund.
We recognise that the Government have included subsections (10) and (11) to cover the car market and to reflect the fact that cars lose value. The AA estimates that a car loses about 40% of its value in the first year of ownership, and that 9% or 10% of that is lost as soon as the owner drives it off the forecourt. Members will know from our conversations on Tuesday that I recently bought my first car, so looking at those figures was deeply depressing. It is deeply depressing for all of us to think about the amount of money we might spend on something that so quickly goes down in value.
Given that the Bill refers to someone being able to get a full-price refund within six months, except in circumstances where a second-hand market exists for the good, the challenge for us is to consider whether we are unintentionally penalising people who buy cars and creating a loophole that might be exploited by traders. Let me explain why we think we are.
First and foremost, if a new car goes wrong within the first six months, it is obviously unfair for the purchaser to suffer that level of financial depreciation. Let us say that a car has gone wrong, the owner takes it in for repair—as the Bill also says they can do—and it still does not work. If it is not working within the first six months, the idea that they should bear the cost of the depreciation when they have clearly been sold something that is faulty does not for us pass the test of whether this is a fair and appropriate measure. We are concerned that someone could be sold a car that has a serious fault and the dealer will say, “Tough. You may have paid £10,000, £15,000 or even £20,000 for this car, but you can have back only £7,000 or £8,000, because there is a second-hand market for these types of car. Even if it’s a faulty car, you can sell it on. Therefore, we’re not going to give you your money back.” Given that we are talking about sums of several thousand pounds, it seems to us dangerous to create that loophole that traders could exploit.
More generally, the notion in the Bill that a given situation is judged on whether there is a second-hand market for the good creates a worrying precedent. In the age of eBay, when there is basically a second-hand market in everything, it is not inconceivable that traders could use that loophole to suggest in relation to a whole range of goods that the money that someone would get back would be substantial. That might apply to the wonderful kettles and jumpers that we have been discussing, or even sofas. Government Members will remember our lengthy discussions about sofas. There is clearly a market in second-hand sofas, but if someone has been sold a faulty sofa and the fault was unable to be repaired within the first six months, should they get back only a fraction of what they paid for it because in theory, someone else would pay money for it on eBay?

Stephen McPartland: Can the hon. Lady clarify something for me? If a car is sold new off the forecourt, anything that goes wrong with it is covered under a warranty. The issue is the sale of second-hand, as opposed to brand-new, cars.

Stella Creasy: I am not sure whether the hon. Gentleman has read the provision, but it is about the six-month period. In general, the Bill states that if someone wants to return something within six months, they should get a full refund. An exception is made where there is a second-hand market, and the provision would apply in the case of a new or a second-hand car. Our point is that we are asking the consumer to account for the depreciation in the value of a good over the six months when they have been sold something that might be faulty. If someone gets to the point where they want to return a good because it is not working, it is not about the warranty, but about the fact that they have been sold a good that is not fit for purpose. The Bill suggests they should be able to return something, whether it is first, second or third hand.
Our concern is that establishing the rule about getting all the money back unless somebody would pay for the good in its second-hand state creates a loophole, enabling a trader to say, “You might have paid £5,000 for this, but I will only give you back £2,000 because it can be put on eBay”. The money will be recouped elsewhere. That seems unfair.

Robert Flello: The point about a lot of warranties—I say this as a consumer who often studies the small print—is that when we start reading them, we often find that they do not cover, particularly with cars, the things we thought they would. So I think that issue is taking us off on a—dare I say it?—wild goose chase.
On the point about the second-hand market, if someone sells an item such as a car that is not fit for purpose, the buyer should get their money back. It is up to the seller to worry about whether they can then find a secondary market to sell on something that is damaged goods. Why on earth should the person who bought it in good faith have to suffer? The person who can perhaps sell it on e-Bay or wherever is the person who should recoup the costs.

Stella Creasy: My hon. Friend hits the nail on the head regarding our concern about the loophole in the clause. I can reassure the hon. Member for Stevenage that we will be coming on to warranties and the confusion caused to consumers about what they can get fixed and what they have to pay for. I alert him now that I have another fantastic story about warranties from my own attempts at buying a car, which I will share with him. He can hardly wait; I can see it in his face.
We are concerned that the clause as drafted is designed to support the car market in general, and that by taking the approach that a second-market exists for anything, it opens up all sorts of issues.

Robert Flello: Whether I am spending £5,000 or £50,000 on something, I want something that does the job. I do not want to have to have it repaired and fixed.

Stella Creasy: My hon. Friend is absolutely right. I will give the Committee an example that illustrates our concerns about how the measure might work. A consumer buys a brand-new car for £35,000. After six weeks, the car starts to suffer intermittent loss of speed. The manufacturer is not able to identify the fault and effect a repair, so the consumer, reasonably, especially given the safety concerns about loss of speed, asks for a refund. At this stage, the car has only 500 miles on the clock.
A nearly new car of the same model costs about £30,000, which means that within the six-month period they would lose £5,000, a considerable sum of money, especially when buying such goods. Our point is that when a car has been sold that is faulty from the start, the fact that someone has driven it off the forecourt should not determine the amount of money they get back, because it was faulty before they drove it off the forecourt. They simply did not know it was faulty, or could not prove that it was. So we are worried that the clause creates a loophole in a market where there is a very obvious level of depreciation, given the prevalence of sites such as eBay and the capacity for goods to be resold. There are also outlet centres, and a strong and thriving thrift market. We are worried that traders who are not acting within the spirit of the law could use that loophole for a whole range of goods, to try to reduce the amount of money that a consumer is rightly owed.
Therefore, the idea of a six-month period in which someone is entitled to all their money back would not necessarily stand the test of time. We could certainly get into the situations we were discussing on Tuesday: consumers complaining, knowing they are entitled to a full refund, and then being told, “Actually, we can put it on eBay, so we are only going to give you this amount back, because there is a second-hand market in it.” Amendment 24 would deal with that issue.
There would be a different point of conversation six months hence, and it is right to say that six months is a reasonable period in which to discover whether a good of that nature is working. In that six-month period in which there is a right to a full refund, there should not be a loophole such as this. We should not have the problems that might arise for consumers such as negotiating a price reduction. That is another problem—the price reduction is determined by the trader.
In the example of the £35,000 new car, one might say, “Okay, after six months, if we were really going to reflect the depreciation of the good you are bringing back, which is not brand-new, should we take 5%, 10% or 20% off its value?” The AA says that 10% comes off as soon as a car is driven off the forecourt, and the average depreciation in the first year is 40%. There could be another unclear set of negotiations for the trader and the consumer to get into; nor would it be clear what the consumer could expect out of that situation.
So one issue to recognise is depreciation, and another is not setting out what that level of depreciation could be. This clause, however well-meant, could inadvertently create huge problems for consumers with some quite substantial goods in some very simple situations. An example is that the car has been faulty from the start, it has taken a while to reflect that and it cannot be repaired. Therefore, someone should be able to get their money back and, however disappointed they might be to return their car, start again. They certainly should not have to search on eBay to check how much they will get back.
I hope the Committee will therefore recognise that, in suggesting that the clause be amended in this way, we are trying to protect consumers, and traders, so they know exactly what they have to deal with. Frankly, if they are selling faulty goods, they should not have to be thinking, “Well, I can get away with it if I can put it on eBay.” The amendment would make the Bill stronger and simpler, which, after all, is what we all said we wanted it to be. I hope Members on both sides of the Committee will support it.

Jennifer Willott: As the hon. Lady said, these amendments remove the exception to the general rule in the Bill that in the first six months after buying a good, the deduction for use is not applied. It might be helpful if I first remind the Committee what is meant by “deduction for use”, because it is not exactly what the hon. Lady suggested. Under the current legislation, if the consumer chooses to exercise the final right to reject, the trader may reduce the refund provided. The reduction takes account of the use that the customer has had of the goods. It is not the value of the goods at that point; it reflects the use the customer has had.
For example, a consumer has been driving a car around for three years and has had normal use before a fault manifested itself. The refund could be reduced to take account of the fact that the consumer has been driving the car for three years without a problem. That seems fair, because the consumer has been caused no inconvenience during those three years of use, and it is therefore right that the consumer be accountable for that use. The Government believe that it is important to continue this existing right in the Bill. It allows traders to apply a deduction from the refund for the use that the consumer has enjoyed, and it tries to ensure a fair balance between the rights of the consumer and of the business.
Under the current law, traders can make a deduction for use at any point to reflect the use the consumer has had. Clearly, it is frustrating for consumers to receive only a partial refund if they have had relatively little use of the goods, and if the use they have had has been overshadowed by the irritation of having to deal with a fault. Currently, therefore, a deduction for use can be made at any time. Because of the frustration and irritation that it causes to consumers, the Bill includes a new protection for them that in most cases prevents a deduction from being applied in the first six months. The general rule for those first six months has this limited exception, which the amendment would remove. As the hon. Lady rightly highlighted, the exception is designed to reduce the potential cost for traders in respect of complex and high-value goods where there is a concern that removing the right to make a deduction, even within the first six months, could bring significant detriment.
The trader will therefore be able to apply a deduction during that six-month period if they can demonstrate an active business-to-consumer second-hand market in goods of the same make and model. Importantly, the exemption does not apply to goods that are commonly traded only between consumers, such as on eBay or other online auction sites; the exemption specifically applies to the business-to-consumer market. Online auction sites tend to be for consumer-to-consumer purchases, which are not covered by the Bill. The trader also cannot simply direct a consumer to a market in similar goods. The market has to be in goods of the same make and model—the drafting is tightly worded.
The exception uses the concept of corresponding goods, which is defined in subsection (11). The trader must be able to point to an active market in goods that are the same, taking into consideration any factors that a reasonable consumer would be expected to consider when buying the goods new. If a reasonable consumer would be expected to consider factors such as the size or capacity of the goods in question as being relevant when buying them new, for example, the trader will need to demonstrate an active business-to-consumer market in the same goods of the same size or capacity.
The criteria are designed specifically to direct the exception to where it is most needed, which is high-value or complex manufactured goods. Those are the goods in which traders have an interest in selling second-hand, and they are also the type of goods that might sometimes be subject to a series of minor faults. A car, for example, might have two small faults. Perhaps a windscreen wiper needs fixing and an indicator bulb has failed, both of which are minor faults that can be easily fixed, but as we have already discussed, the consumer has to accept only one repair before they can move on to their final right to reject. It would not usually be reasonable for a consumer to reject the whole car because of a failed windscreen wiper and a failed indicator bulb and expect a full refund.
In any case, if a trader chooses to apply a deduction, the deduction must reflect the actual use that the consumer has had of the goods. The deduction should not simply reflect the second-hand value of the car; it has to reflect the actual use that the consumer has had.

Andrew McDonald: If something fundamental goes wrong, is the Minister saying that there is a fundamental right to reject the car within six months and get a full refund? If I have that wrong, perhaps she can clarify the matter. Secondly, if there is to be a deduction for reasonable use, is that deduction by reference to time? If someone is off the road for a period of time and wishes to pursue a claim of negligence, for example, the claim would be for loss of use. The claim might be for, say, £25 a day. Alternatively, the deduction might be by reference to mileage, which would be pence per mile. Can she offer any guidance on how that might work in practice?

Jennifer Willott: On the hon. Gentleman’s first point, if a fault is identified in the first 30 days, the consumer will, as with any other goods, have the right to reject and get back the full amount of money. We are talking about when a fault develops between day 30 and six months and where either a repair has failed or there is more than one fault. As with everything else, after that point the consumer has to accept one repair, and for most items the consumer has the right to reject and get their full money back if a second fault develops in the first six months. The assumption is that in the first six months, for pretty much everything, the consumer would get their full money back if, after accepting a repair or replacement, an item does not work. We are talking about the very small group of items for which a deduction for use may apply in the first six months.
On cars, I completely understand what the hon. Gentleman says about time and miles. What represents a fair deduction will need to be considered on a case-by-case basis. If someone purchases a car that develops a small fault after they have driven 40 miles and they spend the next four months off the road waiting for the car to be fixed, the use that they have had is clearly miniscule. However, if someone has been driving a lot and so has driven 10,000 miles in that first six months that is clearly a different situation, even if the point at which they were rejecting the item was the same—after five months, for example. The judgment needs to be made on a case-by-case basis, taking the circumstances into account.

Andrew McDonald: Will that be a matter of negotiation between the trader and the consumer, or is there another arbiter who will resolve what a reasonable deduction is in those circumstances?

Jennifer Willott: I will get clarification for the hon. Gentleman in a minute, but my understanding is that initially it would be a discussion between the consumer and the trader. It will need to be considered on a case-by-case basis, taking into account the balance of all the different things he highlighted. We would hope that the consumer and the trader would be able to reach a reasonable agreement in the same way as when a consumer takes an item back to demand a full refund. If that were not the case, there is a legal route that can be pursued, as with the rest of the Bill, and the consumer would have to go down that route. As the provision has been tightly worded, it should be quite clear that only a very small proportion of items is covered, in a specific market, and that what has to be considered is use that the consumer has benefited from rather than the second-hand value. I hope that it would therefore be relatively self-evident.

Andrew McDonald: I can foresee circumstances where the measure could get us into difficulties, for example if somebody has bought a vehicle, left it in the garage for most of the time and so not had any use out of it, and then gets into a negotiation with a trader who says, “You may have paid £35,000 for it, but I will give you £30,000. That is in full and final settlement, so you either take it or leave it.” That puts that consumer right behind the eight-ball. What on earth do they do in those circumstances? They are between a rock and a hard place—they have to get the money into their account so that they can purchase another vehicle, but the way the negotiation is being presented to them means they have no other form of redress if they dispute the difference between their valuation and that of the trader. It is a bit of a worry.

Jennifer Willott: I think at that point the consumer should call the Citizens Advice hotline for advice on what their consumer rights are, what could be implemented and what action could be taken. It might be, for example, that Citizens Advice knows from other calls that there is a particular problem with that trader— it has identified that person as a trader who has caused issues for other consumers, and so needs to be referred to Trading Standards. It will depend on the circumstances.
The measures in the Bill are designed to be clear, so that businesses and consumers understand their rights. The majority of businesses are honourable and want to ensure that they get repeat business. However, there will always be some that are not, as the hon. Gentleman has highlighted. That is why we have the enforcement route, as well, involving Trading Standards if something criminal has taken place, or else the civil courts. We can design a law as tightly as we want but there will always be some people who try to get around it. That is why the Bill is worded tightly, to be as precise as is possible.
When the Department for Business, Innovation and Skills consulted on the issue, only a small minority of respondents to the consultation favoured scrapping the deduction for use. Two thirds of respondents to the online consultation agreed that it was right that the provision be retained. We need to consider the context at the moment, which is that the deduction for use can be applied at any time. The Government are providing more protection for consumers in the Bill, because the deduction will now not generally be allowed to be applied in the first six months. At the moment, exactly the situation that has been outlined could happen at any point for any item a consumer purchases—after 30 days, a deduction for use can be applied for any use a consumer gets from a car, any wear they get from a jumper or any use they make of a sofa. The Government are tightening up that provision to give consumers more protection than they currently have.
The Government believe it is important to have the exception for the very small group of items involved. It is limited in scope, so the vast majority of consumers would receive a full refund in the first six months, and where a deduction is applied, it will reflect only the actual use that the consumer has had of that product.

Fiona O'Donnell: I apologise for my late arrival. I had a faulty security pass that became detached—though not within 30 days, so I will not be returning it. Returning to a theme raised earlier with the Minister, buying a car often involves a loan, a credit purchase agreement. What is the situation with interest that has been paid on the original capital loan? Would the interest on any credit agreement also be refunded?

Jennifer Willott: I will write to the hon. Lady about that, because that area of policy falls under the Treasury’s responsibilities rather than those of BIS. It is quite complicated, but we are part-way through doing the work on that. I can promise her that she will get a letter, which we will copy to other members of the Committee so they know as well.

Fiona O'Donnell: Often, the other attraction of buying a new car is extended warranties, which may be part of the purchase. What would happen to an extended warranty? Would it be transferred to the replacement vehicle, or would it go back to the original term? Where do extended warranties sit within this part of the Bill?

Jennifer Willott: I think I will have to come back to the hon. Lady on that point. The rights under statute cannot be undermined by anything put into a warranty, so anything in a warranty would sit over and above someone’s statutory rights. I assume it would probably depend on the terms of the warranty and what the contract said, so a warranty would not affect the rights a consumer had in this area. It may be that they had additional rights as a result of the warranty that they had paid for, but we will come later in our deliberations to issues relating to warranties.

Andrew McDonald: Will the Minister bear in mind, as we progress through the Bill, that my hon. Friend the Member for East Lothian has identified an important issue? In circumstances where the goods have failed, the warranty is actually redundant. Any moneys that have been transferred in respect of that warranty ought to be repaid in full, because there has been no ability for the consumer to implement or access that warranty during its term.
We might may have a defective batch of security passes. I do not know whether the consumer services want to have a look, but my badge has also become detached. Something is afoot here that needs to be looked at.

Jennifer Willott: The hon. Gentleman raises issues about the use of a warranty. It would depend on the terms of the warranty. I know that some, for example, enable a consumer to get the full value of the vehicle back if certain things happen within a period of time. It may be that the consumer has already used those terms. The important point is that a level of statutory protection for consumers is laid out in the Bill, and it cannot be affected by the terms of the warranty. With that, I hope that I have clarified the situation and that the hon. Member for Walthamstow will withdraw her amendment.

Stella Creasy: I thank the Minister for her answer, because in talking through this issue, she has raised a number of points that are of real concern to me. First and foremost, she suggests that the value of a car would not be taken into account in deciding on the use that had been made of it. The same goes for goods; we are mainly talking about cars here, because the clause was originally drafted to try to deal with cars. It would be difficult for somebody to go back to the forecourt and say, “This is within my six months, I want my full refund on my lovely, shiny new car that is intermittent in speed. I have only driven it 500 miles”. If the trader then says: “Actually, I look at the second-hand car market and see that it is worth £5,000 less”, that second-hand car market test in and of itself takes into account the value of the good. It does not necessarily take into account the use of a good.
Although the Minister argues that the Bill sets out a test about the use of a good, the Government have determined that the test will about the value of a good on the second-hand market. There is a difficulty there.

Jennifer Willott: The existence of a second-hand market is the test that triggers whether a deduction for use can be considered. It is not the factor that decides what deduction is then given. It is what enables a trader to trigger the exception. That is an important distinction.
At the moment, traders can apply a deduction for use at any point, on any good, so the scenario the hon. Lady mentioned is exactly the position that people are in now. The Bill introduces an underlying assumption during the first six months after purchase that the deduction for use cannot be applied except in certain circumstances. At the moment, it applies across the board.

Stella Creasy: I thank the Minister for that answer. Let me be clear: the Opposition think it is a good thing to give people a clear six-month period in which they should expect a full refund. However, we are concerned that the way in which the clause is drafted undermines that.
I am sorry, but I do not think that the Minister can say that the clause is tightly drafted. Let me be very clear. The clause says:
“No deduction may be made if the final right to reject is exercised in the first 6 months…unless…when the goods were supplied to the consumer, the make and model of the goods were stated, and…the trader gives the consumer clear, independent evidence of an active second-hand market for the sale by traders to consumers of corresponding goods.”
That does not state that it triggers the idea that the consumer and trader can have a discussion about depreciation, but not a discussion about what that depreciation is; rather, it implies that that depreciation should be taken into account when considering the price reduction. She cannot have confidence that the provision has been drafted tightly enough to be in the spirit of her intention that the clause set out simply that if there is a second-hand market, it should be taken into account and there should be a depreciation, but it should not set out what that depreciation should be.

Fiona O'Donnell: We are going to discuss extended warranties and add-ons later, but does my hon. Friend agree that the clause is linked to those? Often the reason people buy a new car is to have an extended warranty—that is why I did so. If I had to return the car and take its second-hand value I could not then replace it with a new car with an extended warranty, because the warranty was not free—it was part of the cost of the original car—and so in that case I would have lost out.

Stella Creasy: I very much agree with my hon. Friend. We are going to come on to warranties, and the confusion that can be created with regard to people’s statutory rights. The Bill is giving people a statutory right to a six-month period in which they can get a refund, and that is welcome, but the challenge is that the way that the clause is drafted creates a loophole. It says that if there is a second-hand market in a good, that market can be taken into account when exercising a price reduction. Our problem is that opening that door opens up all sorts of conversations about what the second-hand market means for the possible price reduction. A second-hand market in and of itself reflects depreciation, so the suggestion that the issue is solely the use of the vehicle rather than its depreciation in value does not stand the test of the Minister’s measure.

Robert Flello: Having recently bought another second-hand car—within the past month—this issue is close to my heart and very much in my mind. I had to travel a quite a lot of miles to get to the garage from which I bought the car. On the matter of use, there is a second-hand market, and the trader from which I bought the car buys cars in for much less than the value for which it sells them, so that is one difference. Also, if I got the car home only to discover there was a fault, could a trader argue that the miles I had to drive to get it home—we are talking quite considerable mileage—counted as personal use? The situation is complicated and the Bill does not recognise the complications.

Stella Creasy: I very much agree with my hon. Friend. There are ways in which some of those complications could be recognised in the Bill. I think we would all encourage the Minister to think about how the clause could be amended to tighten it up to be more in the spirit that she intends, so that the fact that there is a second-hand market cannot in itself allow the trader to say, “We are not going to give you back all the money you paid six months ago.”
Another concern is that the clause is about goods. As much as we are talking about cars, the provision is not drafted tightly enough to specify that it is about particular types of good. I do not think that the Minister’s comments about eBay and other second-hand sites online hold water either, because eBay is full of businesses selling on second-hand and other goods. Again, the test that is set, about sale “by traders to consumers”, does not refer specifically to online markets.

Jennifer Willott: The Select Committee on Business, Innovation and Skills looked at the provision in detail and made recommendations about how to ensure that it was tightly worded so that it did exactly what the Government were saying it should do. We took on board the recommendations that the Select Committee made. It was satisfied—it was confident—that if we put in the Bill the provision that we have, it would give effect to our intention.
On the hon. Lady’s previous point, I want to make it clear that subsection (8) states:
“If the consumer exercises the final right to reject, any refund to the consumer may be reduced by a deduction for use, to take account of the use the consumer has had of the goods”.
It specifically says that it relates to a deduction for use, not the second-hand value. That is the subsection that relates to how a calculation would be done, and it relates just to a deduction for use, not the second-hand value.

Stella Creasy: I am sorry, but I think that the Minister is not being accurate, because subsection (8) also states,
“but this is subject to subsections (9) and (10)”,
and subsection (10) is the one about the second-hand market, so it does refer to the second-hand market. If the Minister reads out subsection (8), she needs to read it out in its entirety. It says specifically that the provisions about the trader giving the consumer
“clear, independent evidence of an active second-hand market for the sale by traders to consumers of corresponding goods”
can be taken into account. That is the problem that we face. There is indeed a provision in the Bill for sites such as eBay and outlet centres to be taken into account when considering whether someone gets their money back and what sum of money they will get back. That is before we get on to the questions that my hon. Friend the Member for East Lothian has raised about warranties and whether someone has paid money for a credit agreement. There is also the question whether the cost of the petrol for someone going to and from the garage can be taken into account.
The test that the Government are setting—that there is a second-hand market—means that the value of a good will be taken into account, so the question of depreciation as soon as someone drives a car off the forecourt can be part of what the trader comes up with. The provision is not drafted as tightly as the Minister thinks. It does refer specifically to the loophole, in subsection (10)(b).

Jennifer Willott: I just want to clarify this for the final time; I do not intend to stand up again. Subsection (10) says whether a deduction can be applied. Subsection (8) says how the deduction is calculated. The two are separate. Subsection (10) is about whether a deduction can be applied. Subsection (8) is about how that is calculated. The two are separate.

Stella Creasy: The Minister needs to think carefully about the argument that she is trying to make, because subsection (8) says specifically that
“any refund to the consumer may be reduced by a deduction for use”.
We all accept that, but it goes on to say specifically that that is subject to subsections (9) and (10), and subsection (10)(b) mentions the role of the second-hand market in determining whether—
 Jenny Willott  indicated dissent.

Stella Creasy: The Minister shakes her head. Let us look at the start of subsection (10), then. It states:
“No deduction may be made if the final right to reject is exercised in the first 6 months…unless”—
and then it gives the proviso that the second-hand market can be taken into account. Surely the fact that we are having this discussion and there is confusion makes the case for tightening the way in which the provision is drafted. Opposition Members understand the spirit of the Government’s intention: a deduction can be made for use; there should be some recognition of the use that the consumer has had from a good. However, we are concerned that opening up the test of what use has been made and therefore what deduction can be made to the notion that there is an independent second-hand market creates a loophole that some traders will use to drive up the deduction. Use will be confused with value. There are ways in which the clause could be amended slightly.
 Jenny Willott  indicated dissent.

Stella Creasy: The Minister shakes her head. I am pleased that she feels confident about it. If I were a consumer taking back a car with the intermittent speed problem that we discussed and the trader said to me, “Look, you’ve had it for four months. I’m looking at the market on eBay that other traders are using and it says that these cars, after four months, are worth only £5,000, so although you paid £8,000, I’m going to give you £5,000, because that is a fair test of what the car is now worth,” would I be able to argue that that did not reflect the use—

Jennifer Willott: Yes.

Stella Creasy: That takes us to the second point, to which the Minister would say, “Well, you’d have to go to the citizens advice bureau.” Given that the Bill specifically states that the second-hand market can be taken into consideration in determining the price reduction, I am not sure that the CAB would say that I have a strong case.

Fiona O'Donnell: Is that a second-hand market for goods before or after the repair has been made good?

Stella Creasy: That is an interesting question, because the Bill refers to goods that correspond. We would all hope that a trader who accepted that a car was faulty would not resell it—

Fiona O'Donnell: A hoover?

Stella Creasy: My hon. Friend was not here when we were talking about her sofa and our desperate concerns for it. The provision would cover not just cars but any goods being sold. The question is whether the depreciation and the value of goods can be properly identified, in order to differentiate, which is what the Minister is trying to do, depreciation in value over time from depreciation by use. The problem is that the clause is not clear on how that would be determined. It is one thing to say, “You have had this beautiful sofa, but it has wonky legs, so it is not worth as much as it would be with straight legs.” But it is another to say, “The sofa has not been sat on for four months because it has wonky legs. The cushions and the scatter cushions are perfect, but the value of the goods has depreciated owing to length of ownership rather than use.”
Under use, the consumer would be entitled to a full refund, but the value would be deflated because it had been away for four months. However, it will be incredibly difficult for a consumer to argue that on a forecourt or in a shop. I cannot believe that the Minister intends citizens advice bureaux to tell consumers that they have a case because they have not sat on a sofa that has wonky legs but that they must go back and argue it out.
I appreciate the notion of giving people the confidence that they have six months to get a full refund, but I urge the Minister to think about tightening the provision. I know that other hon. Members are concerned about the capacity of Trading Standards to look into these issues, because the acts we are discussing will not fall under the criminal law but will be a matter for debate between a trader and consumer about whether use or value should be taken into account in deciding the amount to be refunded. A trader might say to the consumer, “You have driven 500 miles in this pristine car, but you have driven up and down country lanes and stalled the gearbox a number of times.” I live in horror at what my driving might be doing to my gearbox. I do not know whether that results from a fault or from my being a new driver, but if a trader decided to say, “You might think that I am depreciating it for value, but I am depreciating it for use”, there would be a problem.
Our main concern is that the clause will not do want is intended. We support the Government’s intention, but we encourage them redraft it to make it tighter. If the Minister will not make that commitment, we will push it to a vote and encourage the Government, perhaps in the Lords, to differentiate use from value clearly in the Bill.

Jennifer Willott: The matter has been looked at in detail as part of the pre-legislative scrutiny conducted by the Select Committee on Business, Innovation and Skills. It made a recommendation on tightening the clause to make clear the Government’s intention. We took on board its recommendation and amended the Bill, which proves the point of good pre-legislative scrutiny. The Select Committee was happy with the amendment.

Question put, That the amendment be made.

The Committee divided: Ayes 6, Noes 9.

Question accordingly negatived.

Clause 24 ordered to stand part of the Bill.

Clause 25  - Delivery of wrong quantity

Question proposed, That the clause stand part of the Bill.

Steven Baker: I am slightly concerned that subsection (3) might propose a change to the law. I am not an expert, but my understanding is that a consumer who receives unsolicited goods does not have to pay for them. Will the Minister confirm that by accepting a delivery people will not be charged for products that they did not order? I am slightly concerned that unscrupulous suppliers might oversupply a product and that, by merely acquiescing to that oversupply, consumers might be billed for something they did not want.

Fiona O'Donnell: I will not detain members long, as I shall raise this in later stages of the Bill on the rights of small businesses as consumers.
I am looking for some clarification about automatic renewal. Unscrupulous traders often do not communicate with vendors when a product is automatically renewed and the terms and conditions may have changed. Consumers frequently change e-mail addresses, but they then would not be in receipt of that information. How will this clause impact on automatic renewals?

Jennifer Willott: I assure the hon. Member for Wycombe that this subsection does not change the law. Consumers who order, say, eight bags of potting compost but receive 10 have a choice. If they wanted 10 they could pay for 10, they could reject the entire lot or they could just keep and pay for eight.
The issue highlighted by the hon. Member for East Lothian would be covered by the provisions on quantities of goods and unfair contract terms.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clauses 26 and 27 ordered to stand part of the Bill.    - Clause 28  - Delivery of goods

Question proposed, That the clause stand part of the Bill.

Stella Creasy: I rise simply because this is a clause that we want to draw people’s attention to. It relates to the debates we had on Tuesday, about when it is appropriate to set a time scale on something and when it is not. We note that this clause gives consumers confidence that a good has to be delivered within 30 days. I draw the Committee’s attention to it, perhaps slightly pointedly, given some of the conversations and protestations we heard on Tuesday about how difficult it was for traders and suppliers to meet deadlines. If they were trying to fix something in a repair, how could they be asked to do it within 30 days, when they might be trying to get the trader from Italy to fix some wonky sofa legs, or why should they be asked to give a refund within 30 days?
Yet it seems that the Government think it is fair to say that a delivery should be made within 30 days. By intending to give some clarity and simplicity to this legislation about numbers—in the 30-day right to a refund and, as here, a 30-day right to have something delivered—this just seems to us another example of how we can learn to give clarity in other areas of the Bill. We would certainly like to see the 30-day rule more consistently applied. This seems to us an example of where some of the concerns raised by Government Members about suppliers and delivery are not taken into account, yet would be taken into account when it came to a repair. These are all things a consumer would be really concerned about, having got something into their house.
I draw the Committee’s attention to this, on the basis that it should bear it in mind when it comes to some of the work that we will do on Report.

Jennifer Willott: There are differences between purchasing something for the first time and when a consumer asks for a replacement. The initial supply of goods by the trader is under the trader’s control, because they put an item on sale in the first place, whereas the request for a replacement is triggered by the consumer. In the majority of cases when a trader sells an item, they should be in a position to predict the availability of goods. They will know how long it will take them to get it in stock if they do not have it already. They should also know that they can provide it by a particular date. Therefore, it is not particularly onerous on a trader to be required to deliver something within a 30-day period.
On the other hand, in the case of a replacement, the process is initiated by the consumer and the trader has no warning that it will happen. In those circumstances, it is quite possible that the trader will have stock and supply issues and so on, and will not be able to provide a replacement within a fixed 30-day period. The right to request a replacement can extend for up to six years in some circumstances, by which time the trader may not actively stock those particular goods. So it is a very different set of circumstances than the purchase of an item for the first time.
If it is years later, offering a replacement may still represent the most cost-effective remedy for the trader, but they may have to source the goods from elsewhere if they do not sell them any more and so on. That could take longer than 30 days, which is what we were discussing the other day. I hope that that clarifies the difference between the two circumstances for the hon. Lady.

Question put and agreed to.

Clause 28 accordingly ordered to stand part of the Bill.

Clause 29 ordered to stand part of the Bill.

Clause 30  - Goods under guarantee

Stella Creasy: I beg to move amendment 27, in clause30,page19,line26,leave out ‘states’ and insert
‘sets out in full and clearly understandable detail’.
This is the clause that a number of Committee members have been waiting for, in terms of warranties and the additional protections that might be offered when buying something. Let me now satisfy what I know must be the burning inquiry of the hon. Member for Wycombe about my personal experience of a warranty that I was concerned about, which I mentioned earlier. It is the sort of issue that we are trying to tease out in some of our amendments and questions for the Minister.
I think all of us are familiar with the concept of buying something and being offered a warranty to give additional protections for our goods. In many circumstances, it may make a lot of sense if one buys something of considerable value. For me, it was a car, though I am afraid it was second hand, not first hand. It was the first car I had ever bought. The company offered me an extended warranty on top of the provisions that it had already made to get this car serviced and fixed within my first year. This was about extending this warranty and all the provisions with it. For a mere £1,500, I could extend that warranty for three years.
The hon. Member for Stevenage makes the face that I made when I started to go through the numbers. The gentleman in the shop tried to do the sums for me about what this warranty would really cost me and why it was such a great deal compared to what I might end up paying for servicing or if the car was faulty. Obviously, as the Minister would point out to me, at the moment I do not have the same protection that within six months I could take it back and get some kind of a refund, so it was potentially a very valuable piece of paper.
That is the sort of problem we are dealing with. When I looked at the amount of money that the tradesman tried to tell me that I would pay for this wonderful guarantee, it simply did not stack up. That is even before I looked at what I would actually have had to do if I tried to use that warranty. Anybody who has ever tried to exercise a warranty and been told by the trader that the small print says that in that particular circumstance that particular issue does not apply will be very glad of some of the provisions in the legislation. They will be glad that the Government are saying, “There are some statutory rights that you should have, independent of whether you’ve bought a warranty.”
The question for all of us though is that, given that the terms “warranty” and “guarantee” are so well used and well known and given the tendency for traders to use them in conversation with consumers, how do we ensure that consumers know what is their statutory right and what is part of a warranty, what they get as standard and what the added benefit of such a deal is? I can reassure the hon. Member for Stevenage that I did not buy the warranty I was offered. When I did the sums and pointed out to my partner what a bad deal it was, he said, “You’re going to make a fuss, aren’t you?” I said, “Yes, clearly.” At which point, we walked away. Having the time and confidence to do that is about knowing what our statutory rights are as opposed to what a warranty might offer.
The amendment would introduce a rule similar to that which we were developing around point of sale and point of complaint, to ensure that when a customer is sold a warranty they will know what is statutory and what is additional. When they get a warranty, they get a piece of paper—a record of what they have bought—as added protection. First, what does their money buy them and, secondly, what can they complain about and under which laws? It is not a particularly onerous request to make of a trader; after all, if they are going to provide the details of their warranty, as they should because the customer is buying a separate good, surely they can at the same time provide details of the customer’s statutory rights. I know that the Minister has thought differently about whether consumers need all the information at that particular point.

Andrew McDonald: My hon. Friend makes an excellent point. We had the argument before about information on statutory rights at the point of complaint. When someone is purporting to offer a guarantee or a warranty that provides rights and abilities over and above the statutory rights, is not such information even more important at that point, to make the nature of the available statutory rights abundantly clear? I am not saying that what those rights are necessarily has to be in the clause now, but there should be an obligation on those providing warranties to state what consumers’ ordinary statutory rights are. A consumer might decide that it is pointless to have the alleged benefit of the warranty.

Stella Creasy: I completely agree with my hon. Friend. Looking at what was offered by the extended warranty and comparing it with the warranty that the car company claimed was standard with the car I was buying made me realise that it was not a particularly good deal. “As standard” is what we are talking about in terms of statutory rights. Helping consumers know what they should expect as protection, as opposed to what additional benefits they might buy, seems welcome. Let me give the Committee an example of how that might apply.
If a consumer buys a computer and an extended guarantee that says that it will not break down in the first six months, the consumer might believe that they are buying an additional guarantee that it will not breakdown in the first six months. As we discussed, under the Bill, they will be entitled in any case to a full refund, so why would they need to buy an extended warranty? They would be buying something superfluous. If they were told their rights at the point of purchase, it would, first and foremost, probably stop computer companies and so on from selling extended six-month warranties, because those rights would clearly be provided already, and it would mean that consumers could make a more informed choice about whether the additional protections and costs they incur by taking out the warranty were warranted. Martin Lewis talked about that in his evidence. He said that there was confusion among consumers between a warranty and statutory rights. If we make the system simpler and improve people’s understanding of what consumer rights are when they buy goods, it would first and foremost stop them buying unnecessary warranties. We have all had the frustration of saying, “It wasn’t worth the paper it was written on.” Given that the legislation gives protections, it is more important that we protect those rights by ensuring that people have information.
The amendment does something simple. The Government’s legislation says that consumers should have information. Consumers should not just be told when they buy something that they have statutory rights, they should be told what those rights are. In the same way, when a consumer buys a warranty, they should not just be told that they have statutory rights, but what those rights are. That way, a consumer can compare them against what a warranty offers and make a better informed decision about whether they want to buy it. I hope the Minister will accept the amendment.

Steven Baker: The hon. Lady makes a reasonable point. Considering the length of the Bill, how long does she envisage that such a statement of full and clearly understandable detail would be? I hope it would be fewer than 120 pages.

Stella Creasy: I admire the fact that the hon. Gentleman believes that the Bill is purely about people’s statutory rights and not about how they are accessed. He will recall the conversations on statutory rights we had on Tuesday and on the Thursday before the recess, and how simple the Government seek to make them. There are not that many to remember; Citizens Advice and Which? have come up with pictures of them.

Steven Baker: How long?

Stella Creasy: If he has not done so, I encourage the hon. Gentleman to look at the picture from the Citizens Advice briefings on rights, such as that goods should be fit for purpose, satisfactory and returnable within 30 days. I am sure he could give me his own test, because I know he has been listening adamantly to all the conversations on the Bill.

Steven Baker: It is the hon. Lady’s amendment. I am asking how long she thinks that a full statement in clearly understandable detail should be. I am not asking how big the picture is from Citizens Advice. How long does she think a full statement of people’s rights should be?

Stella Creasy: I am surprised that the hon. Gentleman does not believe that Citizens Advice offers a good metric on the length. Let me be clear. For the avoidance of doubt, what Citizens Advice has suggested is entirely reasonable, and that is what should be included. We had this discussion about point of sale and point of complaint information before.

Andrew McDonald: I am becoming confused. Did we not hear evidence from Martin Lewis, who produced a card no bigger than a wallet, clearly stating statutory rights? I do not understand the problem. Is my hon. Friend equally puzzled? It is a fairly simple issue. It is a piece of paper that could go inside a wallet.

Stella Creasy: I thank my hon. Friend. I would like to ask the hon. Member for Wycombe why he has not sought to amend the Bill to limit the size of a guarantee. I hope his concern comes from the possibility that somebody might be deluged with pieces of paper. The Bill does not preclude that happening as a way of trying to confuse a consumer.
We have clear examples of how these rights could be simply set out and applied and the remedies simply defined. Perhaps the hon. Gentleman can tell me whether he thinks it is right to tell people that they have six months to get a full price refund, except when they can buy something on eBay. That sentence could be included in a guarantee. Does he feel it would be a terrible burden on the trader to change warranties to include that? Perhaps he is already on eBay looking at a new product to check these items.

Steven Baker: I was listening carefully as I checked what was being proposed. I am not sure that I accept her assertion that a full statement of rights can be fitted into a wallet. I think the hon. Member for Middlesbrough used that example. If the hon. Lady believes that the Citizens Advice picture or Martin Lewis’s guide on one page is acceptable as a full statement of our rights, that is fine. I understand that that is her position.

Stella Creasy: I recognise the hon. Gentleman’s genuine concern that people should not be weighed down with paper or long e-mails. I assume that that is his concern. He would rather that people were simply told that they had rights at the point of buying something, rather than ensure that they were able to cross-compare. He says, “Buyer beware!” If you will permit me, Chair, we can reassure the hon. Gentleman by showing him the length of the item that fits neatly on one page of A4. If we had with us the warranties from previous sales contracts they would be length of this briefing. Perhaps the hon. Gentleman would agree with us, since we argue that people should have this information at the point of sale, that statutory rights should be on the wall clearly displayed.
The amendment would ask that that
“sets out in full and clearly understandable detail”
people’s rights. The Opposition do not wish to direct businesses to the extent that the hon. Gentleman wants. 
I have been shown that the terms and conditions can be fitted on the back of a receipt, no less. I appreciate the hon. Gentleman’s genuine and reasonable concern to avoid people being deluged with information, but given that Citizens Advice has done so much work on the issues I hope I can assure him that a solution is possible. Indeed, I am sure that the Minister will tell us that the implementation group is looking at this very issue.

Steven Baker: Does the hon. Lady believe—yes or no—that a statement of rights on the back of a receipt is a full statement of people’s consumer rights?

Stella Creasy: Yes, because if it is a statement of people’s rights, that is what it should list. It is one of our concerns that such a list is not required currently. I have said to a number of people in recent weeks, “Please take me with you if you want to return an item, because I feel I could make a good case”. I am sure that, in the course of our conversations, many other members of the Committee have become much more aware of what they can and cannot request and, therefore, the simplicity of what we propose.
I am surprised by the hon. Gentleman’s new-found concern that providing people with information might not be a good thing. I caution him, because I have listened intently to the Minister who has spoken time and again about how people might access such information. She said that the Government oppose our attempts to ensure that everyone has such information in a simple and standardised format because the implementation group is looking at precisely how to do that. I am concerned that the Minister might have a bit of a Back-Bench rebellion on the need to provide the information at all if the hon. Gentleman continues with such questions.
The hon. Gentleman is making a strong case for why it is important that people can separate out what they are being offered. Surely he would not want someone to be offered a warranty without being given its full details. After all, someone seeks recourse to a warranty only when something has gone wrong. They would look at the clauses of their warranty to see whether they were covered—whether, for example, the sofa with the faulty legs was covered or whether it had been purchased sold as seen, in which case the trader would say, “Tough”.
If we can be so confident that we want people to have details of a warranty, is it unreasonable to argue for an additional page informing them of their entitlements in law? There should be no chance of a trader trying to tell them, “Well, tough. The legs might be faulty, but I told you that that wasn’t covered in your warranty”, and for that to supersede their statutory rights. I am sure that the Minister would agree that, in such circumstances, we should have no truck with someone who tried to confuse a customer with a warranty that they wrote to try to supersede a national law on what can and cannot be expected.
People need that knowledge in such awful moments when they have to complain. I return to the conversation we had on Tuesday and I hope that I can bring a little of my psychological background to the debate. No one likes complaining and no one likes it when things go wrong. We want to try to make it as simple and easy as possible for people to put things right.

Mary Glindon: Is my hon. Friend aware that many retailers that sell white goods or televisions advertise longer guarantees? I worked for a well-known department store that gave two-year guarantees on items guaranteed by the manufacturer only for one year. That adds an extra complication, as the second year’s guarantee is allegedly the same as the manufacturer’s guarantee. Consumers could, however, buy the same item in another shop and get only a year’s guarantee. It is important that customers know their statutory rights when even guarantees can vary.

Stella Creasy: My hon. Friend is absolutely right. I am sure that the Minister would point out that she said earlier that some people are still entitled to a price reduction up to six years after buying something. There are all sorts of scenarios in which warranties and guarantees may apply.

Stephen McPartland: Will the hon. Lady clarify which rights she suggests would fit on the back of a receipt? Are they a summary of a customer’s rights or their full legal rights? The right to reject, for example, which is outlined in the Bill, takes up five pages of A4.

Stella Creasy: I think the hon. Gentleman has hit his head—[ Interruption. ] In my own mind, I am already re-reading Freud as well. Where he wants to hit his head is not up to me.
I am sure that the Minister will tell us that the implementation group is looking at such questions. Our amendments are about not missing the opportunity presented by the Bill to ensure that when the implementation group has come up with the perfect way to describe something—a neat, clear and understandable format—it does not add to the paperwork that people receive when they get their warranty; it will be possible to put it on the back of a receipt.
That should not be only a guidance issue—every consumer should have it, so that at that awful moment when they complain they can turn it over and say, “Here is what I have, and you are in breach of my rights”, or “You are trying to sell me a warranty that existing law already gives me, so do not tell me that when I bring my broken computer back you cannot fix it, or I cannot have a refund. That is my legal right, and is nothing to do with whether I bought your warranty.”
People encounter those situations regularly, and we are trying to ensure, in the light of the hard work being done by the implementation group, that it will be every trader’s responsibility to give out the information. It should not be done by only the best traders—those who offer excellent additional warranties, which unlike the one someone tried to sell me are worth the paper they are written on. Independently of those warranties, people should know that if something goes wrong in six months they can take the item back.

Andrew McDonald: The Martin Lewis summary of rights is a simple, concise statement of statutory rights. It is perfectly proper and easy to refer someone to the entire Act, or even to give a website link to it, or the telephone number of the citizens advice bureau, if someone wants to take a matter up. That is infinitely better than leaving people in the dark, which coalition Members would be perfectly happy to do. They should stop digging.

Stella Creasy: Opposition frustrations with the concerns that coalition Members express are about a preoccupation with how to help people in such situations to get things right, and to feel able to complain and resolve issues quickly and appropriately. I hope that coalition Members recognise that we are trying through our amendments to prevent the good work of the implementation group from going to waste. I hope that the Minister will take them in the spirit in which they are intended, as a way to ensure that people who buy things have the information they need about what type of good to expect and what to do if things go wrong. That is all we ask.
Amendment 27 is also intended to prevent traders from using warranties to confuse the issue.
 Stephen McPartland  rose—

Stella Creasy: The hon. Member for Stevenage wants to intervene. I shall take his intervention and then we should hear from the Minister. I am sure that she takes a positive view of the work of the implementation group, even if some Back Benchers perhaps do not.

Stephen McPartland: I am grateful to the hon. Lady for letting me intervene again. The amendment uses the words “in full and clearly”, but we have been talking about a summary. I am concerned that an elderly person might be given 72 pages of documentation to sign when she buys something.

Stella Creasy: I am disappointed, then, that the hon. Gentleman did not table amendments to prevent warranties consisting of 72 pages of extra paperwork from being given.

Stephen McPartland: I may do.

Stella Creasy: The hon. Gentleman says he may do so. We are debating the clause today and I have seen no amendments from him so far, so his concern about paperwork does not necessarily ring true. He has not put his money where his mouth is.

Robert Flello: If someone gave me a warranty 72 pages long, the alarm bells would go off in my head and I would wonder how many caveats, get-outs and wrangles there were. I am not sure I would want to buy something with such a warranty, because I would think “You are effectively saying it does not cover anything.”

Stella Creasy: My hon. Friend highlights why, in the light of the concerns of the hon. Member for Stevenage, and the fact that he is obviously aching to table an amendment limiting the length of warranties so that people can be confident about the information, it is disappointing that he has not done so. [ Interruption. ] I am pretty confident that it would have been in order to do that for this clause. I hope the hon. Gentleman will reflect on that, and I look forward to seeing the amendment he will table on Report.
In the meantime, all we are seeking to do, given that the legislation already sets out that people should be told their statutory rights as part of a warranty, is to establish what form that would take, so that we can be confident that it fits in with the implementation group’s suggestion, meets the concerns about point of sale and point of complaint, and means that people cannot be sold a duff warranty. That is not a particularly radical idea. I hope that the hon. Member for Wycombe is never sold a duff warranty, because it is very distressing when it happens, not least if it is 72 pages long. Goodness knows how he would fit that in his car on the way home.
I hope the Committee will support the spirit of and intention behind the amendment. I fear they will not, but I hope that, when we discuss the implementation group, the Minister will be a bit more positive.

Fiona O'Donnell: I promise not to detain Members for too long, but I would say to the hon. Member for Wycombe, who was concerned about the semantics of the amendment and the use of the word “full”, how full was the coalition agreement? It was supposed to be a full programme covering every aspect of our lives, but I think they probably condensed it.
For the first time, I am going to have to disagree with my hon. Friend the Member for Walthamstow. She said that no one likes complaining and taking back faulty goods, but I have to admit that, on the rare occasions when my grumpiness needs an outlet, I relish finding fault with something and taking it back to the shop, despite awful memories of shopping with my mother, who would ask in stores, “Do you have any slightly soiled or damaged goods?” It was a brave attempt to obtain goods cheap, but it was extremely embarrassing, as a child, to be there.
This is an issue that I genuinely get very angry about, and I have been known to stand in the queue at well-known large electrical outlets and inform consumers of their rights as the salesperson is trying to sell them an extended warranty. People are often put under pressure to sign up to and pay for the warranty there and then. They are told that it is only available now, and they are not made aware of any cooling-off period. It is not just a question of how such warranties interact with their statutory rights; often, they duplicate rights that they may have under other insurances such as home insurance. That can cause problems further down the line. As we all know, when we make an insurance claim, the insurer asks whether the item in question is covered by any other policy.
I was standing next to someone when they were buying a fridge-freezer and heard them being told, “If you’re moving house, don’t worry—that will be covered by this warranty.” However, it was probably already covered under their home contents insurance. Moreover, removal firms provide policies that cover all the goods being moved. That person was then told that, in the event of a fault, the goods inside the fridge-freezer would also be covered by the extended warranty. I then chipped in and said, “I think you’ll find that they are already covered.” At that point, I was asked to leave the store, but never mind. The market is slightly healthier these days, but a lot of retailers saw this as a way to pressurise worried consumers into paying for such warranties on the day. To me, selling someone goods in the hope that they will break down or develop a major fault shortly afterwards seems rather pessimistic.
I would have liked us to have gone further, saying that retailers have to make people aware that they could be duplicating cover by purchasing such warranties.

Mark Durkan: Does my hon. Friend agree that this and any similar amendments that would help to curtail the racket that is extended warranties would not just protect consumers, but would protect staff from being pressured into persuading consumers to buy payment protection insurance that they do not need? Many staff are compelled to do this, even though they know in their heart of hearts that it is not in the consumer’s interest for them to make that extra payment.

Fiona O'Donnell: Absolutely. My hon. Friend makes an excellent contribution to the debate. That is indeed the case, and sometimes staff are even on commission and given targets to achieve in selling the products. I therefore hope that the Minister will see that there is an opportunity here. The Government are making a great and brave attempt to improve consumer rights, and the amendment is an opportunity to ensure that we go that extra distance.

Jennifer Willott: I am sorry that I have to upset a number of hon. Members this morning.
Extended warranties, which several hon. Members spoke about, do not come under the clause at all. The clause is about guarantees that are given without extra charge and covers only guarantees that are part of the package handed out by a shop. If someone purchases an extended warranty, they would not be covered by the clause anyway. Although the hon. Member for Walthamstow mentioned sold warranties a number of times, they are not related to the clause, which deals just with guarantees that are not paid for. Extended warranties that are paid for are covered by other parts of the Bill and the unfair terms provisions, as we discussed. They are also covered by Financial Conduct Authority regulations. The clause relates just to free guarantees.
The Government acknowledge that confusion might be caused by the wording that was highlighted by Which? in its evidence to the Committee. It raised concerns about the phrase that is probably on the back of the receipt that the hon. Member for Middlesbrough produced: “This does not affect your statutory rights.” People do not understand what that means. It does not help anyone to have that information.
I want to reassure the Committee that we are committed to clarifying the situation and to making it easier for people to understand what their rights are. I have said this before, and I will say it again: that is what the Bill is all about. It is about providing clarity and simplicity both for businesses and consumers. To make the Bill work, consumer education is critical, so that people know what their rights are without having to wade through acres and acres of pages.
Clause 30 already requires any guarantee to include a statement informing the consumer that they have rights under the Bill that are not affected by the guarantee. It will also require the guarantee to be written in “plain and intelligible language”, in an effort to get round problems with jargon that people do not understand. Those provisions are already in the clause. I think we all agree that it is sensible that guarantees contain that reminder, so that people know that they have rights under the Bill.
It is important that the consumer can make sense of the reminder. Which? pointed out that ensuring that it is intelligible and that people understand how to access information are equally important.

Fiona O'Donnell: I apologise that I was not accurate. The Minister should have stopped me.
Often, when free, additional extended warranties are offered, the retailer will ask the consumer to register the warranty, for some reason. It requires the consumer to give out their personal contact details. Is that a condition of statutory rights or only a condition of extended warranties? I would like a shop to tell me about that when I am buying something. I was always under the impression that I had to give those details to have my statutory rights.

Jennifer Willott: Statutory rights apply when a consumer purchases something. Whatever the guarantee says on top of them, it cannot limit them. If the trader includes something that is contrary to a consumer’s statutory rights, then it is not binding; statutory rights take priority.
Often, traders will ask for personal contact details. A related issue—electrical recalls—was raised on Second Reading by Members from Northern Ireland; I think the hon. Member for Foyle mentioned it. Often, traders will ask for information so that they have a way of getting in touch with consumers. Otherwise, they have no way of knowing who bought their items and how to get in touch with them again. The two issues are often linked, but statutory rights cannot be undermined or removed.
As ably pre-empted by the hon. Member for Walthamstow, the issue is one for the implementation group to work on. It is important that the group identify a clear and understandable wording, which will be published in the form of guidance to provide the information. The debate on what “full” would mean when providing information, on which members of the Committee have very different ideas, illustrates that, if it were a requirement, it would be difficult for businesses to know what they are supposed to be providing. The information that is provided to businesses is important, and the implementation group has a critical job in identifying the best way to provide that information.

Steven Baker: The Minister is right, but does she agree that the practical experience of life today is that we are constantly provided with agreements that are far too long because businesses wish to protect themselves from being sued? Opposition Members, by supporting this amendment, are being unrealistic about the common practices of businesses that overload consumers. I welcome what the Minister is doing to try to ensure that people get reasonable information.

Jennifer Willott: The hon. Gentleman is right. That is one of the issues about which we are concerned. I have referred in previous debates on similar subjects to the research on how information overload is counter-productive. How many people read all the information before they tick the little box to say that they have read all the terms and conditions? We know that nine out of 10 people have not read all the information. Just providing the information is not very helpful. We need to consider how we can provide information in a form and channel that people can access and easily understand.

Andrew McDonald: The Minister has been extremely helpful with her clarifications. I will restrict my intervention to guarantees. Does she agree that it is offensive—whether it is an offence is another matter—when traders incorporate within a guarantee the rights that the consumer already has by virtue of statute? On the related point of people offending under this clause, subsection (8) states that it applies if
“a person fails to comply with a requirement of this section”.
I am happy for the Minister to come back to me on this, as I do not intend to ambush her, but is the drafting correct? I might be entirely wrong, but when I look at the definition, it seems that a “person” is a consumer. Was the intention to refer to “a guarantor or any other person”? I do not know whether that is right—I could be entirely wrong.

Jennifer Willott: If it is okay with the hon. Gentleman, I am keen to wrap up, because we are coming to the end of the sitting. I will get back to him on his last point.
On the point about including statutory rights in guarantees, we are talking about guarantees that are provided free of charge. It is perfectly fair for a guarantee to set out the consumer’s statutory rights. Particularly as the consumer is not paying for the guarantee, it should include the consumer’s rights. The amendment addresses how we ensure that people know their rights and how that information is shared through guarantees.
As the hon. Gentleman said earlier, the most appropriate way to provide information to a consumer might be to direct them to Citizens Advice, or a website, or whatever it might be. That may be a more effective way of directing someone to a summary of their statutory rights, and it is something that might be considered. As the hon. Member for Walthamstow said, Citizens Advice has suggested how that might be done, which is welcome. That may be the best way forward. My understanding is that the work has not yet been tested on consumers, so we are not completely sure of the best and most easily accessible way for consumers to get information on their rights.
It would not be helpful to keep adding to the list of things that businesses have to tell consumers, because we would end up with a morass of information that was difficult for people to access. The implementation group’s work to identify how to ensure that people get the right information at the right time in the right way is important to making the Bill work. I therefore do not think that including the matter in the Bill is the right way forward.

Andrew McDonald: If we leave it to the wonderful work of the implementation group, is not the danger that whatever the group comes up with will simply not have any statutory force?

Jennifer Willott: The vast majority of businesses want consumers to return, because they benefit from repeat trade and good customer service. We know that if there is guidance that makes it simpler for businesses to operate with repeat custom from happy consumers, that is the way they will go. As we said earlier, there will always be rogue traders, so we must ensure that there is effective enforcement. We also know that involving both businesses and consumer groups in agreeing a way forward and a best way to share information, so that people know their rights, is effective in ensuring that businesses take up and follow guidance. I hope that hon. Members are reassured by my answers.
Before I sit down, I have a response to the hon. Member for Middlesbrough on subsection (8), which uses the word “person” because the clause imposes obligations on the guarantor and any other person who supplies the goods. By law a person is not necessarily an individual and can be a company. I hope that answer clarifies his point.
I ask the hon. Member for Walthamstow to withdraw her amendment.

Ordered, That the debate be now adjourned.—(Mr Gyimah.)

Adjourned till this day at Two o’clock.